Credit Connect

Latest figures released by the Bank of England suggest that high levels of consumer credit will ‘increase scrutiny’ on household debt. The Bank of England has published its latest monthly Money and Credit report showing continued growth in consumer credit of 9.9 percent in the year to September. Outstanding balances for consumer credit now stand at over £204 billion.

The figures come in the week the Bank’s Monetary Policy Committee are predicted by many commentators to raise interest rates for the first time since 2007.

Commenting on the figures, Joanna Elson OBE, Chief Executive of the Money Advice Trust, the charity that runs National Debtline,“The Bank of England and Financial Conduct Authority have rightly been paying close attention to rising levels of household debt. The fact that consumer credit continues to soar, with balances now over £204 billion, will only increase this scrutiny.

“With household debt a growing concern and an interest rate rise likely as early as this week, we encourage households to exercise caution before taking on additional borrowing – and consider how they would be able to cope with repayments in the event of a shock to their income. Millions of people will have never experienced an interest rate rise. We are concerned that a small rise, combined with high levels of borrowing, rising living costs and slow wage growth could be enough to push many households into financial difficulty.”

Peter Tutton, Head of Policy at StepChange Debt Charity, said: “The continuing growth of consumer credit, and particularly credit card debt, should act as a warning sign about the financial health of households in the UK. Our research estimates that nearly 9 million people are using credit to pay for everyday household expenses, and with the Institute for Fiscal Studies (IFS) pointing out that average real wages are lower than they were a decade ago, more people are at risk of falling behind their everyday bills and becoming trapped in spiralling problem debt.

“The Financial Conduct Authority needs to make sure that increased credit card lending does not push more people into long term debt. Lenders must make robust affordability checks and set minimum repayments to clear credit card borrowing quickly. We are looking for the credit card sector to deliver a clear plan setting out how lenders will help people out of persistent debt and financial difficulties.”